Monday, October 17, 2011

In 2012 the Supreme Court will decide for the first time if
Congress has the power to force the purchase of a good or service under Article
I § 8 of the Constitution, and Virginia will be left watching from home.

President Obama signed the PPACA, a sweeping overhaul of America's
healthcare system, into law in March 2010.
Litigants, including high profile state attorneys general lined up to
challenge the new law, specifically the individual mandate. A strategic decision to bring suit separately
by the Commonwealth
of Virginia was a
tremendous gamble, and is about to become a losing bet.

On September 8, 2011 the U.S. Court of Appeals for the
Fourth Circuit overturned
Virginia's challenge to the individual mandate in Commonwealth v. Sebelius.
The fact the 4th Circuit upheld the individual mandate was not
surprising given the expectations from the panel selected. The concerning element of the ruling was the
reason for the dismissal, standing.
Standing is the doctrine that one must be the party actually injured
before you are allowed to bring a lawsuit, the concept is derived from Article III § 2 Cl. 1
of the Constitution. Further discussion
of standing can be found here.

Decisions from the 6th, 11th, and now 4th Circuit are ready
to be appealed to the Supreme Court.
Other courts are not far behind. Because of the nature of the 4th Circuit
ruling in the Virginia case, I predict the Supreme Court will not invite the
Commonwealth of Virginia to argue in one of the most important cases of our
era.

Did Virginia make a mistake by going it alone?

In a word, no.

A bare minority of states decided before the PPACA was
passed to sue to invalidate Obamacare once it was passed. This became the successful Florida and 11th Circuit cases. Virginia declined to participate in that
lawsuit. I believe there are three major
reasons why Virginia
pursued this matter separately.

1. Speed: Virginia could file in
the U.S. District Court for the Eastern District of Virginia also known as the
"Rocket Docket." It is called
this because statistically the E.D. Va. is the fastest federal court for
adjudicating civil cases in the country.
By suing in the E.D. Va. Virginia could likely get a decision sooner, be
in the appeals court sooner, and be the first to appeal to the Supreme
Court. The Fourth Circuit is also known
for being fairly swift.

2. Medicaid: The
other states wanted to pursue another argument regarding the
unconstitutionality of Obamacare due to additional burdens placed on state
Medicaid programs. When the federal
government gives money to the states it can do so with strings attached. There are some minor limitations to this
principle, but they did not apply in this instance. Despite winning in both the district court
and the 11th Circuit on the issue of the individual mandate, the other states
lost the Medicaid argument before all of these judges. This was a bad argument, and watered down an
otherwise strong and more important argument invalidating the individual
mandate.

3. VHCFA: Virginia
passed the Virginia
Health Care Freedom Act ("VHCFA") shortly before the passage of
Obamacare. This act says in short:
"No resident of this Commonwealth, . . . shall be required to obtain or
maintain a policy of individual insurance coverage . . ." Va.
Code § 38.2-3430.1:1. This law
provided Virginia
a unique opportunity to challenge a federal law as being in direct
contravention of a state law.

These are all good reasons.

Many will speculate as to the additional reasons Virginia filed
separately. The purpose of this article
is not to speculate as to those additional reasons.

Did something go awry
in the District Court?

No.

Virginia,
for the most part won at the District Court level. The little Virginia
lost (conceivably a large loss), allowed Virginia
to control the timing of appeal. Virginia did what it
planned and successfully used the speed of the rocket docket to reach the 4th
Circuit first.

Should Virginia have merged its
case in the 4th Circuit?

Probably not.

A case from the Western District of Virginia also reached
the 4th Circuit at about the same time.
This case, Liberty U. v. Geithner,
was brought on behalf of a university and a handful of individuals on commerce
clause grounds, and religious liberty grounds.
The plaintiffs in Liberty U.lost
at an early stage in their case in the district court. In the 4th Circuit the cases were
to be heard on the same day by the same judges, but were to remain
separate. Virginia made no attempt to merge the two
cases.

The Liberty U.
plaintiffs had problems showing standing, and their religious liberty arguments
were fairly weak. Virginia,
as a governmental entity, came into the 4th Circuit in a strong position, and
made a good strategic decision not to tie its fate to the Liberty U.
plaintiffs.

Virginia lays the groundwork for its loss.

After all the briefing, and preparation, Virginia laid out
the basis for its loss at oral argument.
The 4th Circuit panel selection was unfavorable for Virginia.
Virginia made things worse as the panel
hammered counsel on the issue of standing, and counsel for Virginia ultimately rested their entire
basis for standing on the VHCFA. Stating
in no uncertain terms:

"I'm resting my claim on my statute." - Va.
Solicitor General at oral argument on Commonwealth v. Sebelius, Record
No. 11-1057, U.S. Court of Appeals for the Fourth Circuit, May 10, 2011.

After the 4th Circuit argument, the 6th and 11th Circuit's
hear oral arguments in similar cases. The
4th Circuit then orders
Virginia to perform additional briefing, delaying the potential date for a
decision. The 6th Circuit turns around a
decision
in approximately one month upholding the individual mandate. Virginia has now lost the advantage of speed. The 11th Circuit then rules,
striking down the individual mandate and dismissing the Medicaid challenge
without fanfare. Virginia lost its second reason for going it
alone. The 4th Circuit does not rule
until September.

Virginia took just enough rope . . .

Relying on Virginia's steadfast unwavering statement that
the VHCFA is the only basis Virginia has for standing, the panel reversed the district
court and dismissed Virginia's case for lack of standing. The panel did not even explore any other
possibilities for standing because Virginia
chose only one. Regardless of the panel,
this was always a mediocre legal argument, but a good argument in the
media. Yet, the case is not tried in the
media. The last reason to go it alone
was gone.

But how did the other
states survive this hurdle?

In a little discussed portion of the 11th Circuit opinion,
the court examined the nature of the parties in the 11th Circuit case. By that time, 11th Circuit case involved over
25 states, the NFIB, and a handful of individuals. The 11th Circuit analysis indicates

"Although the
question of the state plaintiffs’ standing to challenge the individual mandate
is an interesting and difficult one, in the posture of this case, it is purely
academic and one we need not confront today. The law is abundantly clear that
so long as at least one plaintiff has standing to raise each claim—as is the
case here—we need not address whether the remaining plaintiffs have standing.
See, e.g., Watt v. Energy Action Educ.
Found., 454 U.S.
151, 160, 102 S. Ct. 205, 212 (1981) . . ." p. 10.

The 11th Circuit determined that
at least one individual plaintiff had standing, and as such all the plaintiffs
may proceed. No such individual
plaintiffs were joined with Virginia
in its lawsuit, and it would have been difficult to predict this outcome.

If Virginia lost due to lack of standing, do they still get to go to
the Supreme Court?

I believe the answer to this
question will be no.

Standing is a procedural
issue. A decision on the
Constitutionality of the individual mandate is a substantive ruling. The Supreme Court takes only a small
proportion of all cases appealed. One of
the major factors it looks for when deciding to take cases is a circuit split,
a disagreement between circuit courts on a major issue. There is currently a circuit split between
the 6th and 11th Circuits on the Constitutionality of the individual
mandate. The 4th Circuit dismissed
Virginia's case on procedural grounds, and did so on an issue that is
nonexistent in all the other cases. The
Supreme Court will likely take the appeals of the 6th and 11th Circuits and may
even join in the Liberty U. case and
cases not yet decided in the 3d, 9th, and D.C. Circuits.

If the Supreme Court allows Virginia to proceed, it
will add a substantial additional complicated standing issue for which there is
no current circuit split. For this
reason I expect that Virginia
will not be invited to the dance and will have to watch the litigation play out
with the rest of us.

Where was the mistake made and what can be done?

At some point extremely early in
the litigation, during the first motion to dismiss filed by the federal
government in the district court, Virginia
made the decision to use this argument, and only this argument to create
standing. Judge Hudson agreed with
Virginia’s reasoning, and Virginia did not have to face this issue again until
the appeal.

Little can be done to add to the existing arguments. The same argument was brought at both the
trial and appellate levels and the petition for writ of certiorari has already been filed.

Making this argument was a huge
risk. If successful, it would provide an
avenue for extensive 10th Amendment litigation driven by federalist attorneys
general. This would possibly be an even
bigger victory than simply overturning Obamacare. If unsuccessful, Virginia ran the outside
risk that it would be left out of a Supreme Court battle that may decide the
scope of Congressional power for decades to come.

If Virginia does not get before
the Supreme Court, it is time to bring the next 10th Amendment case, and then
the next one. Still, in Commonwealth v. Sebelius Virginia took
the risk, and it looks like it is about to come up on the short side of
history.

My previous analysis of
litigation regarding the individual mandate can be found here.

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